Reference no: EM131790775
Exercise 10-7 Pina Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,993,900 on January 1, 2017. Pina expected to complete the building by December 31, 2017. Pina has the following debt obligations outstanding during the construction period.
| Construction loan-12% interest, payable semiannually, issued December 31, 2016 |
$2,020,000 |
| Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2018 |
1,599,500 |
| Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2021 |
1,009,400 |
Assume that Pina completed the office and warehouse building on December 31, 2017, as planned at a total cost of $5,193,600, and the weighted-average amount of accumulated expenditures was $3,824,200. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to 0 decimal places, e.g. 5,275.)
Compute the depreciation expense for the year ended December 31, 2018. Pina elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $298,700. (Round answer to 0 decimal places, e.g. 5,275.)